Back to Taylor Legal Website

February 1, 2014

There is No Such Thing as a "1099 Employee"

An independent contractor by definition is a person or can be another company even, who is hired to perform a job for another person or business. How, where, and when the job gets done is under the sole control of the contractor, not the hiring company. On the other hand an employee is a person hired by a company to perform a job function within a business and the hiring company controls how, when, and where the job is performed. There is no such thing as a “1099 employee.” The two are totally separate classifications under law and can’t be combined into one. Someone who does work for your company is either an independent contractor or an employee and cannot fall under both categories.

One of the major differences between independent contractors and employees are that independent contractors are responsible for paying their own taxes from their earnings. The hiring company is not responsible for withholding state and federal taxes, Social Security or Medicare taxes for a contractor or vendor. Employers are responsible for paying the income of their employees as well as withholding all taxes and offering healthcare benefits under law.

The IRS has a 20 point checklist to help businesses properly classify their workers as either independent contractors or employees. Here are the major points used to classify independent contractors:

Who has control? A worker is an employee if the person for whom he works has the right to direct and control him concerning when and where to do the work. The employer need not actually exercise control; it is sufficient that he has the right to do so.

Right to fire. An employee can be fired by an employer. An independent contractor cannot be fired so long as he or she produces a result that meets the specifications of the contract.

Training. An employee may be trained to perform services in a particular manner. However, independent contractors ordinarily use their own methods and receive no training from the employer.

Set hours of work. Workers for whom you set specific hours of work are more likely to be employees. Independent contractors, on the other hand, usually establish their own work hours.

Misclassifying an employee as an independent contractor can result in serious fines and penalties by the IRS. 1099 refers to the form companies issue to independent contractors for tax purposes. It’s very important you aren’t issuing a 1099 designation to someone who should be classified as an employee and receive W-2 forms instead, which documents how much money was withheld throughout the year for federal, state, Social Security and Medicare taxes. To help you determine the right classification for your workers, consult the complete IRS checklist. If you’re still unsure, it might be best to consult an accountant or a business attorney who specializes in small business and corporate laws.

Follow by Email

Subscribe To

Search This Blog

Disclaimer

Disclaimers

No Attorney-Client Relationship Created

Law Office of Katherine L. Taylor, P.A. d/b/a Taylor Legal™ is placing this website on the Internet for access by interested persons only and the information shall not be forwarded to any person or entity who has not sought out the information contained herein. These pages are intended to provide information of a general interest to the public and are not intended to offer legal advice about specific situations or problems. Taylor Legal™ does not intend to create an attorney-client relationship by offering this information, and your review of the information shall not be deemed to create such a relationship. You cannot be considered a client of Taylor Legal™ unless and until you sign a Legal Services Agreement. Because we cannot and will not offer legal advice without knowledge of relevant facts pertinent to your legal situation, you should not act, rely, or fail to act, based upon any information provided on this website.

Viewing our website or communicating with us by electronic mail does not create an attorney-client relationship. We request that you not send confidential information or requests for legal advice via electronic mail. The firm does not assume any legal obligation to respond to unsolicited electronic mail.

Information to be Used Only Within the State of Maryland

To the extent that this website contains advertising, please be advised that Taylor Legal™ neither solicits legal clients nor attempts to practice law outside of the State of Maryland, despite the fact that persons outside of the State of Maryland may access this website. Further, while information on this site is not intended to provide legal advice and not intended to create an attorney-client relationship, such information, to the extent used or reviewed, should be used and reviewed only by persons within the State of Maryland.

No Representations or Warranties

Taylor Legal™ makes no representations or warranties, express or implied, about the legal services or results that it may be able to achieve for its clients. We will do our best to acquire the legal result that you desire within all obligations to professional responsibility should you chose to retain our services.

The information on this website may or may not reflect the most current legal developments. While we strive to include accurate and up-to-date information on this website, we make no representation or warranty whatsoever as to such information, including representations or warranties of completeness, accuracy or currency of information.

This website contains links to other web pages. The inclusion of such links, however, does not constitute referrals or endorsements of the linked entities. We specifically disclaim any responsibility for positions taken by users in their individual cases or for any misunderstanding on the part of users of this website or any linked websites.